Scavengers began circling the troubled Union Pacific Railroad on Wednesday as federal officials struggled to craft a solution to the crisis that has left mountains of this year’s corn harvest piled on the ground outside grain elevators and shippers clamoring for rail cars.
Officials of the Omaha-based railroad insisted in a hearing before the U.S. Surface Transportation Board they’ve solved many of the congestion problems that have slowed or halted shipments from California to New Orleans and sharply reduced operations throughout the upper Midwest.
But officials of the Burlington Northern and Santa Fe Railway, the Railroad Commission of Texas and virtually every shipping association argued that more federal intervention is needed.
The transportation board in October gave the Union Pacific until midnight Thursday to fix the problems that have plagued it since last year’s merger with the Southern Pacific Railway.
If the board finds that shipping problems persist, it could extend the deadline, order the Union Pacific to allow other railroads to take over operations on its tracks or even reverse the merger.
The Texas Railroad Commission proposed a transfer of Union Pacific assets to a new terminal railroad in the Houston area. The new railroad would handle all switching and permit other railroads to begin serving shippers in the Houston area. A thousand miles north, Union Pacific’s problems are helping propel a plan for a third railroad to begin serving the Powder River Basin coal fields in Wyoming.
Even the International Brotherhood of Teamsters weighed in by calling for federal officials to reverse the merger.
“The Union Pacific has been publicly humbled,” said Joseph Schwieterman, associate professor of transportation at DePaul University. “We haven’t seen anything like this since the Penn Central debacle of the 1970s.”
The collapse of the Penn Central Railroad prompted Congress to create Conrail. Conrail now is proposing that its own operations be split between the CSX Transportation Co. and the Norfolk Southern Corp.
“I would expect that we will see initiatives in a variety of spots to take advantage of UP’s failure,” said Richard Barnes, a professor of management at Lehigh University.
But Union Pacific officials said they will fight any efforts to dilute the grip they hold because of their merger.
“You should reject all of the grab-bag of overreaching and inappropriate requests that were filed,” Richard Davidson, chairman and chief executive officer of Union Pacific Corp., told transportation officials Wednesday. “The Texas Railroad Commission’s proposal to hand over most of our track in Houston . . . would be particularly disastrous.”
The Texas commission bitterly fought the plans that allowed the Union Pacific to merge with the Southern Pacific.
But commission Chairman Charles Matthews said it now just wants to make the merger work.
“Union Pacific problems have cost the Texas economy $800 million since July. We have been careful to propose a modest solution that will work,” he said.
Schwieterman said the railroad commission’s plan is the first of many competitive proposals that the Union Pacific will have to fight.
One of those is being crafted in conjunction with the State of South Dakota and the Dakota, Minnesota & Eastern Railroad Corp. The railroad wants to construct 200 miles of track along the old Milwaukee Road right-of-way acquired years ago by the state.
That plan is being considered by Illinois Central Railroad officials who say they could help the Dakota line deliver coal to utilities throughout the Midwest.
